RAB consolidates mutual mergers

Two mid-sized mutuals, Regional Australia Bank and Holiday Coast Credit Union, have announced they are in merger discussions and that their due diligence process is about to start.

If negotiations are successful, the result will be a merged organisation with more than A$2 billion in assets.

Assuming the deal is approved by the Australian Prudential Regulatory Authority and the respective members of the two customer-owned entities, a formal merger is expected to be in place by 30 June 2019.

It would then become the biggest merger in the sector since 2009, when Savings and Loans and Australian Central Credit Union merged to become Peoples Choice CU.

In a media release announcing the pending deal, the payoff was said to be “greater product diversification, simplified fee structures and competitive pricing” for members.

Nevertheless, the combined entity will continue to operate both the Regional Australia Bank, and the Holiday Coast brands in their respective locations – based around Armidale and the NSW mid-north Coast, respectively.

According to the local paper, the Wauchope Gazette, the HCCU has assets of $607 million, 25,000 members and 98 staff. That’s less than half of Regional Australia Bank, making Holiday Coast the junior partner in this deal.

The two previous mergers that involved Regional Australia Bank were in 2008, when it merged with Orana Credit Union (based north of the New England area) and in 2010 when it merged with Hunter Mutual (based around Scone and Singleton in the upper Hunter area). The two smaller merger partners in these deals had assets of $82 million and $107 million, respectively.

This transaction reflects a wider trend towards consolidation among mutual ADIs, notably in New South Wales.

NSW was, until recently, home to around 50 per cent of the mutual ADIs in Australia, but that number is dropping with increased frequency. Across NSW there are now 38 mutuals, down from 49 three years ago.

In the past three years, the number of mutuals in the greater Sydney region has fallen from 22 to 13, and the trend is continuing.

Once the tie-up between Central Coast-Unity Bank, and the mergers next year between Coastline-Summerland, Regional Australia Bank-Holiday Coast CU and Endeavour Mutual Bank-Sydney CU are all formalised, there will be just 34 mutual ADIs left standing in NSW.

One possible catalyst for further change could emerge in the form of Graham Olrich on the boards of both Summerland and Regional Australia Bank. If all four came together down the track, that would create a major player in the sector.